Can Apple Disrupt The Luxury Watch Industry With A $10,000 Smartwatch?

Who is Apple's target audience for the Apple Watch? While the immediate expectation is to target the nascent smartwatch industry, is Tim Cook aiming outside of the technology circuit and towards the high-end luxury watch market?

As the Apple Watch was announced, three tiers were named: Apple Watch Sport, Apple Watch, and Apple Watch Edition. The prices for the Apple Watch Sport will start at $349, and nothing more was said. With my tech hat on, I suggested $349/$449/$549 as the pricing in this week's Apple Loop, but those numbers now feel too low.

Given the materials suggested, the Apple Watch Sport with aluminium at $349 is a reasonable price. It's the pricing for the second and third tier watches that are far too low. As John Gruber points out on Daring Fireball, the stainless steel watch with a sapphire screen could easily reach $1,000. If Apple releases a solid gold Apple Watch, the raw gold alone could cost a few thousand dollars. Apple traditionally looks for high margins with its products, so there's no reason why the entry-level Apple Watch Edition, made with 18-karat gold, could command a starting retail price of $5,000, with further customisation options reaching $10,000.

The Apple Watch (image: Apple PR)

Without a subsidy model similar to the smartwatch industry to mask the cost of hardware the iPhone 6 Plus that can reach $950 for the 128 GB model before subsidies are applied), the price of the high-end luxury Apple Watches are going to come with a lot of sticker shock for people more used to thinking $199 for the new iPhone.

Which is great for Apple. Breaking out of the tech silo and the tiered pricing forced into the contract model, will give them far more scope to position the Apple Watch as a standalone brand with a huge level of aspiration and status. Much like Rolex, Tim Cook will be hoping the Apple Watch can carry a significant level of cachet. It certainly comes with a similar margin on the product.

While a four-figure price may seem high to the Silicon Valley circuit, it still offers a watch with far more functionality, at a slightly lower cost, compared to brands such as Rolex, Tag Heuer, and Omega. Ironically, Apple could be entering the luxury watch market at the low end of the price range and be seen as a 'cheaper' watch than the competition.

Apple's sports model of the Apple Watch, starting at $349, will be the watch that the tech circles pick up in vast numbers. I've no doubt that it will sell in significant numbers, become the world's number one smartwatch, and the legends of Apple rewriting a category space will continue. But Tim Cook's goal is much higher than that. It's not just the reinvention of the smartwatch category, it is the disruption and potential domination of the luxury watch industry that Cook will seek to challenge during 2015.

I am known for my strong views on mobile technology, online media, and the effect this has have on the public conscious and existing businesses.I've been following this space for over ten years, working with a number of publishers, publications and media companies, some f...